EU Court: digitally-distributed software, games can be resold as used

It's no secret how most video game publishers and software vendors in general feel about the second hand market. Well, their cries for lost sales revenue are bound to get worse in Europe, after a landmark ruling by the High Court in the European Union declared that it is legal for someone to sell their licenses for physical or digital software to another person, as long as they uninstall or otherwise deactivate their copy first.

The case related to a dispute between Oracle and UsedSoft in which Oracle was seeking to stop retailer usedSoft from reselling licenses for its software. The company argued that the EULA under which the software was originally sold contained a specific term prohibiting the license from being transferred to a third party.

However, the European Court of Justice ruled that:

Where the copyright holder makes available to his customer a copy – tangible or intangible – and at the same time concludes, in return form payment of a fee, a licence agreement granting the customer the right to use that copy for an unlimited period, that right holder sells the copy to the customer and thus exhausts his exclusive distribution right. Such a transaction involves a transfer of the right of ownership of the copy. Therefore, even if the licence agreement prohibits a further transfer, the rightholder can no longer oppose the resale of that copy.

In other words the right of software developers to control distribution of a piece of software is "exhausted" (i.e. lost) once the developer has been paid for it (first sale). However, it was also made clear that if a second hand sale goes ahead then the first purchaser must stop using his copy of the software, because the developer's right to control reproduction of software is not exhausted on a second hand sale.

Up until now the second hand market was mostly limited to physical copies of software — even though companies are trying to curb that practice — but with the rise of digital distribution it was increasingly difficult and in most cases impossible to get some cash in return for your old, no longer used games and programs.

It will be interesting to see the repercussions this ruling will have on the gaming market. Some believe the likes of Steam and Origin will have to facilitate a digital pre-owned market in Europe, which is good news for consumers, but it may also deter digital retailers from offering regular sales promotions.